Only a captured government drone could put out a report showing only 38,000 new jobs created, with the working age population rising by 205,000, and have the balls to report the unemployment rate plunged from 5.0% to 4.7%, the lowest since August 2007. If you ever needed proof these worthless bureaucrats are nothing more than propaganda peddlers for the establishment, this report is it. The two previous months were revised significantly downward in the fine print of the press release.

It is absolutely mind boggling that these government pond scum hacks can get away with reporting that 484,000 people who WERE unemployed last month are no longer unemployed this month. Life is so fucking good in this country, they all just decided to kick back and leave the labor force. Maybe they all won the Powerball lottery. How many people do you know who can afford to just leave the workforce and live off their vast savings?

In addition, 180,000 more Americans left the workforce, bringing the total to a record 94.7 million Americans not in the labor force. The corporate MSM will roll out the usual "experts" to blather about the retirement of Baby Boomers as the false narrative to deflect blame from Obama and his minions. The absolute absurdity of the data heaped upon the ignorant masses is clearly evident in the data over the last three months. Here is government idiocracy at its finest:

Number of working age Americans added since March - 406,000

Number of employed Americans since March - NEGATIVE 290,000

Number of Americans who have supposedly voluntarily left the workforce - 1,226,000

Unemployment rate - FELL from 5.0% to 4.7%

Talk about perpetrating the BIG LIE. Goebbels and Bernays are smiling up from the fires of hell as their acolytes of propaganda have kicked it into hyper-drive. We only need the other 7.4 million "officially" unemployed Americans to leave the work force and we'll have 0% unemployment. At the current pace we should be there by election time. I wonder if Cramer, Liesman, or any of the other CNBC mouthpieces for the establishment will point out that not one single full-time job has been added in 2016. There were 6,000 less full-time jobs in May than in January, while there are 572,000 more low paying, no benefits, part-time Obama service jobs. Sounds like a recovery to me.

It gets even better. The birth death excel spreadsheet "adjustment" added 224,000 phantom jobs into the May calculation. The lies - they burn. We know for a fact more businesses are closing than opening since the 2008 financial crisis. This model assumes more openings than closings. IT'S ADJUSTMENT IS DEAD WRONG. In reality, jobs should be subtracted from the total. It added 231,000 phantom jobs in April too. The jobs numbers are much worse than the bad numbers being reported.

When you see lies, misinformation and deceitfulness at this level, you have to ask yourself whether this entire debt supported house of cards is about to fall. The smell of desperation is in the air. The MSM stories about a booming economy are rolled out on a daily basis. Meanwhile, the average family is being crushed by Obamacare, rising rents, rising food costs, and no interest on any savings they might have left.

It also seems awfully suspicious that within seconds of the awful report, the faux journalists immediate reaction was NO FED RATE HIKE in June or July. These pundits of propaganda want the ignorant masses to think a .25% increase in interest rates actually matters to the economy or the average person. We've had ZIRP for almost seven years and the economy blows. Rates have been at emergency levels as the establishment has flogged the economic recovery story to death. There has been no recovery for the average person. The recovery has been for Wall Street and the sycophants who suck off their teat.

Obama has been on his self congratulatory tour exclaiming how fucking awesome the economy has been under his reign of error. The Bush presidency was most certainly a fiscal disaster, but Obama's tenure was even worse. The numbers don't lie, but Obama does.

Look at that stupendous record of success. Obama should be as proud as punch. Since the unemployment rate is now back to 2007 levels, before the Federal Reserve/Wall Street/Washington DC created financial implosion, let's take a look at the Obama success story:

The workforce has grown by 21 million people, while the number of employed has grown by a whopping 5 million.

The labor participation rates has plunged from 66.0% to 62.6%, the lowest since the 1970s.

The number of Americans who have left the work force because their lives are so fulfilled is 16 million. I'm sure there is no correlation to food stamps or SSDI enrollment.

The Boomer retirement narrative is proven false by the fact that a record percentage of Americans over the age of 65 are working in order to avoid starvation and homelessness.

Of the 5 million jobs added since 2007, only 2 million of them were full-time.

Obama's success in destroying the mining industry is borne out in the 207,000 jobs destroyed in the last two years.

The percentage of men aged 25 to 54 (prime working years) not working is at an all-time high.

Real median household income (using the fake understated CPI) is still 1.3% LOWER today than it was in 2007.

Wages continue to stagnate in the 2.3% range, while real inflation for real people in the real world exceeds 5%.

It doesn't matter how much propaganda the establishment peddles, average families who aren't beholden to the establishment for their living, know how bad the things have gotten. They have been getting increasingly pissed off. The rising tide of support for Trump and Sanders is a reaction to the lies, misinformation, mismanagement, corruption, and lawlessness of the establishment. The people know they have been screwed. The complex web which makes up the establishment control makes it difficult for the average person to discern who exactly has screwed them, but they know a screw when they feel it.As this summer progresses and the economy continues to sink, the anger will continue to build. The violence has already begun, as paid thugs are bused in to create havoc at every Trump rally. The establishment fears the unknown. They need to control the agenda. Trump scares them. The economy is clearly in recession for the average family. The stock, bond, and real estate markets are the most overvalued in history. A crash in any or all of these markets would unleash mayhem. The next five months could alter the future course of this country. Stay tuned.

There are more explanations than solutions for the productivity slowdown.

ECONOMIC growth stems from two main sources: putting more people to work or enabling workers to operate more efficiently (ie, better productivity). With the workforce in many developed economies likely to stagnate or decline in the next two decades as the baby-boomer generation retires, a lot is riding on improvements in productivity.

So the recent progress of productivity in developed economies is cause for severe disappointment. As the chart shows, growth is well below its level in the late 20th century; the brief surge that was seen in places like America and Canada at the time of the dotcom boom has also dissipated. A combination of productivity growth of 1% or so and a stagnant workforce implies very sluggish GDP growth.A new paper* from the OECD tries to understand this puzzling slowdown in productivity. It cites a number of possible explanations. There is the “progress is over” thesis, for example: that modern advances in information technology are nothing like as revolutionary as the spread of electricity or the car. Another possibility is the shift from a manufacturing to a services economy, where many workers may be less productive (and their jobs hard to automate). And then there is the question of mismeasurement: some activities, such as free internet-search engines, may not show up in GDP statistics; productivity in service industries is hard to measure.

The role of technology lies at the heart of the puzzle. There were clearly gains in the late 1990s and early 2000s, as the internet reduced transaction costs and allowed companies to track their sales and inventories in real time. There may of course be further gains to come, as companies adopt such technologies as 3D printing or driverless vehicles.

However, most countries have seen a slowdown in technology investment (as a proportion of GDP) since the dotcom boom. Even with interest rates at record lows, it would seem there are fewer attractive high-tech projects around.It may not just have been technology that caused America’s productivity surge in 1996-2004. Another possible factor is the spread of “global value chains”—business networks linking suppliers in many countries. Companies that want to be part of a global value chain must be as efficient as possible; otherwise competitors will overtake them. Global trade expanded rapidly in the late 1990s and early 2000s as value chains were formed. But since the financial crisis trade growth has been even more sluggish than GDP growth. This may be slowing the development of value chains, and thus productivity.A further factor may be a slower rate of new business formation. In the medium term, you would expect new businesses to be more efficient than the old ones they replace. But according to the latest data (2012-13), new firms account for a much smaller share of companies in most countries than before the crisis.Another factor is the mismatch between the skills of the workforce and the needs of industry. In the wake of the recession of 2008-09, many workers were forced to take lower-paying jobs. A survey conducted in 2013 found that more than 20% of workers in rich countries thought they were overqualified for their job (in England and Japan it was over 30%). The ready availability of workers may also have persuaded firms to hire more staff, rather than making capital investments.At the same time, however, employers also complain of skill shortages. Perhaps Western education systems are not turning out the sort of graduates modern businesses are looking for. Perhaps governments need to encourage more training in the workplace.The OECD thinks these fundamental factors are more plausible explanations of the slowdown than mismeasurement, especially as the decline is both long-lasting and has affected emerging, as well as developed, economies.Slowing productivity is one of the biggest problems facing rich countries. But it is remarkable how little it features in public debate. Rather than figure out how to make domestic production more efficient, politicians like Donald Trump focus on keeping out goods and people from abroad. When governments do try to improve productivity (such as the reforms to the labour market the French government is pursuing) they face huge resistance. That suggests the problem is not going to go away.

Fed governor Daniel Tarullo said the Fed is likely to require the largest U.S. banks to maintain an amount of capital under stress equal to a ‘surcharge’ the Fed required those banks to hold under normal times last year. Photo: for The Wall Street JournalWASHINGTON—The biggest American banks will likely have to bulk up their balance sheets further to protect against possible financial shocks, Federal Reserve officials said Thursday.The new requirements could crimp profitability and dividend payouts at those firms, while increasing pressure on them to shrink.Fed governors Daniel Tarullo and Jerome Powell, in separate public comments, said the central bank would probably decide to require eight of the largest U.S. banks to maintain more equity to pass the central bank’s annual “stress tests,” exams designed after the financial crisis to measure the ability of banks to weather a severe downturn.“I have not reached any conclusion that a particular bank needs to be broken up or anything like that,” Mr. Powell said at a banking conference. The point is to “raise capital requirements to the point at which it becomes a question that banks have to ask themselves.”The change is likely to be proposed formally later this year and isn’t expected to take effect before 2018—though banks will have to start adjusting their finances sooner to phase in the changes required to meet those standards.“That’s not good for us,” J.P. Morgan ChaseJPM0.18% & Co. Chief Executive Officer James Dimon said Thursday at a financial-investor conference in response to the comments. The bank is the country’s largest by assets and would be hardest hit by any changes. “Hopefully we’ll be able to adjust,” Mr. Dimon said. “We put a lot of power, money, people on to get these things right as we modify our business practices to meet the new rules.”J.P. Morgan says current rules require the bank during normal times to maintain an additional capital buffer of 3.5% of certain assets, compared with banks not considered systemic. That requirement previously was 4.5% before the firm made some moves to shrink over the past year.Citigroup Inc., Bank of America Corp.BAC0.54% and others face similar, though less strict, capital “surcharges,” which are tailored to a bank’s size, complexity and links to other firms, aiming to capture their impact on the financial system. The other banks covered are Goldman Sachs, Morgan Stanley,MS-0.76%Wells Fargo WFC0.22%& Co., State Street Corp.STT0.06% and Bank of New York Mellon Corp.BK-0.21%

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Meanwhile, the Fed said Thursday it would announce results of its annual stress tests on June 23 and June 29, first on how banks performed on the stress tests and then whether it has approved the capital plans of the largest banks, including whether they will be able to increase dividends and share buybacks. This year, 33 of the largest U.S. banks are taking the tests.The proposal is the latest salvo in a battle between banks and regulators since the financial crisis over how much the largest banks need to reorient their business models to protect against the possibilities of big losses and another taxpayer bailout. Wall Street argues the banks have done enough already to guard against another crisis and that any further tightening risks undermining the vitality of the financial system.“It’s a tax on banking,” Goldman Sachs Group Inc.GS-0.43% Chief Economist Steven Strongin said Thursday at a banking conference, referring broadly to new rules that he said go beyond what would have been required to prevent the 2008 crisis. “This hurts those individuals that are dependent on banking services,” such as midsize companies, small businesses and low-income consumers, he said.

Regulators say they are still not convinced the banks have evolved sufficiently to reduce the danger that they could destabilize the financial system, by simplifying their sprawling business structures or making themselves smaller. The new capital rules previewed Thursday by Messrs. Tarullo and Powell weren’t prompted by any new warning signs that have emerged in the financial system but rather are part of the Fed’s gradual process of weighing new safeguards since the crisis.“Effectively, this will be a significant increase in capital,” Mr. Tarullo said on Bloomberg television. He said the extra capital was necessary in case big banks face a danger that the Fed’s annual stress test didn’t predict. Mr. Powell said that the Fed’s move would go beyond existing rules to make big banks “fully internalize the risk” they pose to the economy. While some critics want to break up these large banks, the Fed has instead sought to force them to tighten capital and other rules they must follow, effectively taxing their size. The rules have sent a clear message to big banks: Staying large will be costly.Mr. Powell also said the benefits of such rules are likely to outweigh the risk that they would hamper the smooth functioning of markets, by forcing banks to pull back from their market-making role. “I don’t believe that it will have a significant negative effect on liquidity,” Mr. Powell said of the Fed’s next move.The specific change that Messrs. Tarullo and Powell previewed Thursday involves taking the higher capital requirements big banks now face during normal times—the “surcharge” for being big—and forcing them to meet those standards during periods of stress as well. That effectively forces those institutions to hold even more capital on their books throughout the business cycle, as capital levels would likely fall during a recession when losses would rise. Fed officials have long said they were considering such a requirement, but these were the most explicit comments confirming that they are likely to impose that rule.The potential inclusion of these new surcharges in future stress tests has been a concern of both bank executives and investors for some time. The Fed-administered tests have become a constraint for banks and many executives now manage with these exercises in mind. That isn’t surprising given the tests’ importance in banks’ getting the Fed’s blessing on paying dividends and buying back stock.But it also means banks are constantly trying to adjust to a shifting regulatory environment. The stress tests are something of a black box—intentionally designed by the Fed as such to keep banks from trying to game them. So that keeps banks off balance, even as they spend millions and hire thousands on compliance efforts meant to satisfy regulators and pass the tests.Bank-stock investors seemed to take the news in stride. Shares of the biggest banks were mixed Thursday as the broader market fluctuated during the day. That in part reflects the opaque nature of the stress tests, which are difficult for analysts to model. Shares of the biggest banks are still mostly down year to date, even as the S&P 500 has eked out a small gain. So, investors are less likely to punish them further for rules that could take some time to kick in.The rule covers the eight banks considered crucial to the functioning of the U.S. financial system. The Fed in 2015 said those banks would have to maintain a surcharge of extra capital beyond what other banks hold, a rule that will fully take effect in 2019. Boosting such requirements forces banks to fund themselves with more equity to offset their debt, reducing the gains they can receive by using borrowed money, or leverage. This is a shift that can make certain business lines less profitable.

If you are an investor of the Ben Graham school, you've lived your life looking for "value" investments with a "margin of safety." Periodically, if you are a pure value investor, then you go through long periods of pulling your hair out when momentum rules the day, even if you believe - as GMO's Ben Inker eloquently stated in last month's letter - that in the long run, no factor is as important to investment returns as valuation.This is one of those times. Stocks have been egregiously overvalued (using the Shiller CAPE, or Tobin's Q, or any of a dozen other traditional value metrics) for a very long time now. Ten-year Treasuries are at 1.80% in an environment where median inflation is at 2.5% and rising, and where the Fed's target for inflation is above the long-term nominal yield. TIPS yields are significantly better, but 10-year real yields at 0.23% won't make you rich. Commodities are very cheap, but that's just a bubble in the other direction. The bottom line is that the last few years have not been a great time to be purely a value investor. The value investor laments "why?", and tries to incorporate some momentum metrics into his or her approach, to at least avoid the value traps.Well, here is one reason why: the US is the destination currency in the global carry trade.A "carry trade" is one in which regular returns can be earned simply on the difference in yields between different instruments. If I can borrow at LIBOR flat and lend at LIBOR+2%, I am in a carry trade. Carry trades that are riskless and result from one's market position (e.g., if I am a bank and I can borrow from 5-year CD customers at 0.5% and invest in 5-year Treasuries at 1.35%) are usually more like accrual trades, and are not what we are talking about here. We are talking about positions that imply some risk, even if it is believed to be small. For example, because we are pretty sure that the Fed will not tighten aggressively any time soon, we could simply buy 2-year Treasuries at 0.88% and borrow the money in overnight repo markets at 0.40% and earn 48bps per year for two years. This will work unless overnight interest rates rise appreciably above 88bps.We all know that carry trades can be terribly dangerous. Carry trades are implicit short-option bets where you make a little money a lot of the time, and then get run over with some (unknown) frequency and lose a lot of money occasionally. But they are seductive bets since we all like to think we will see the train coming and leap free just in time. There's a reason these bets exist - someone wants the other side, after all.Carry trades in currency-land are some of the most common and most curious of all. If I borrow money for three years in Japan and lend it in Brazil, then I expect to make a huge interest spread. Of course, though, this is entirely reflected in the 3-year forward rate between yen and real, which is set precisely in this way (covered-interest arbitrage, it is called). So, to make money on the Yen/Real carry bet, you need to carry the trade and reverse the exchange rate bet at the end. If the Real has appreciated, or has been stable, or has declined only a little, then you "won" the carry trade. But all you really did was bet against the forward exchange rate. Still, lots and lots of investors make precisely this sort of bet: borrowing money is low-interest rate currencies, investing in high-interest-rate currencies, and betting that the latter currency will at least not decline very much.How does this get back to the value question?Over the last several years, the US interest rate advantage relative to Europe and Japan has grown. This should mean that the dollar is expected to weaken going forward, so that someone who borrows in Euro to invest in the US ought to expect to lose on the future exchange rate when they cash out their dollars. And indeed, as the interest rate advantage has widened so has the steepness of the forward points curve that expresses this relationship. But, because investors like to go to higher-yielding currencies, the dollar in fact has strengthened.This flow is a lot like what happens to people on a ship that has foundered on rocks. Someone lowers a lifeboat, which looks like a great deal. So people begin to pour into the lifeboat, and they keep doing so until it ceases, suddenly, to be a good deal. Then all of those people start to wish they had stayed on the ship and waited for help.In any event, back to value: the chart below (source: Bloomberg) shows the difference between the 10-year US$ Libor swap rate minus the 10-year Euribor swap rate, in white and plotted in percentage terms on the right-hand scale. The yellow line is the S&P 500, and is plotted on the left-hand scale. Notice anything interesting?

The next chart shows a longer time scale. You can see that this is not a phenomenon unique to the last few years.

Yes, the correlation isn't perfect but to me, it's striking. And we can probably do better. After all, the chart above is just showing the level of equity prices, not whether they are overvalued or undervalued, and my thesis is that the fact that the US is the high-yielding currency in the carry trade causes the angst for value investors. We can show this by looking at the interest rate spread as above, but this time against a measure of valuation. I've chosen, for simplicity, the Shiller Cyclically-Adjusted P/E (CAPE) (Source: http://www.econ.yale.edu/~shiller/data.htm)

Now, I should take pains to point out that I have not proven any causality here. It may turn out, in fact, that the causality runs the other way: overheated markets lead to tight US monetary policy that causes the interest rate spread to widen. I am skeptical of that, because I can't recall many episodes in the last couple of decades where frothy markets led to tight monetary policy, but the point is that this chart is only suggestive of a relationship, not indicative of it. Still, it is highly suggestive!The implication, if there is a causal relationship here, is interesting. It suggests that we need not fear these levels of valuation, as long as interest rates continue to suggest that the US is a good place to keep your money (that is, as long as you aren't afraid of the dollar weakening). That, in turn, suggests that we ought to keep an eye on rates of change: if the ECB tightens more, or eases less, than is priced into European markets (which seems unlikely), or the Fed tightens less, or eases more, than is priced into US markets (which seems more likely, but not super likely since not much is presently priced in), or the dollar trend changes clearly. When one of those things happens, it will be a sign that not only are the future returns to equities looking unrewarding, but the more immediate returns as well.

If you know the other and know yourself, you need not fear the result of a hundred battles.

Sun Tzu

We are travelers on a cosmic journey, stardust, swirling and dancing in the eddies and whirlpools of infinity. Life is eternal. We have stopped for a moment to encounter each other, to meet, to love, to share.This is a precious moment. It is a little parenthesis in eternity.